BEIJING, CHINA - A woman rides her bike passed a BMW painted with the national flag of China on it in the street on July 8, 2021 in Beijing, China.
(Photo : Kevin Frayer/Getty Images)
The BMW-Brilliance Auto Group Joint Venture in China will have the German automaker taking a controlling share after finally securing the necessary license from the Beijing government. On Friday, February 11, BMW announced that it would pay $4.2 billion (€3.7 billion at current exchange rates) to take a controlling share at BMW Brilliance Automotive Ltd., per CarScoops.
The massive deal would increase BMW's share in the Chinese joint venture from 50 to 75 percent, giving the German firm the controlling stake in the company. The deal will provide BMW more control over its car business in China, which allows it to produce and sell vehicles in the largest automotive market in the world.
The move was a long time coming for BMW, which first announced plans to increase its stake with Brilliance Auto Group in 2018. That was the year China decided that it would start relaxing rules pertaining to ownership rules in its car industry.
China relaxes foreign ownership rules in the auto industry
The Asian powerhouse announced at the time that it would remove foreign ownership caps for automakers making fully electric and plug-in hybrid vehicles in 2018, for those building commercial vehicles in 2020, as well as for the broader car market by 2022. Volkswagen was the first to take advantage of this new rule, grabbing a majority share of its joint venture, JAC Volkswagen, back in 2020.
Other companies have followed suit, including BMW, with the German brand saying that the deal would have a one-off positive effect amounting to 7-8 billion euros on the financial results of its car business, according to CGTN. The move will also boost free cash flow by about 5 billion euros, with the company now having majority control of BMW Brilliance Automotive Ltd.
BMW Chief Financial Officer Nicolas Peter was delighted with the deal, saying, "Our extended joint venture contract lays the foundation for further mutual growth and progressive development." Peter added that the agreement "paves the way for balanced development in the three main regions of the world."
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BMW expects Chinese sales to grow in 2022
Reuters reported that BMW was the first carmaker to announce that it would take control of its main Chinese joint venture, founded back in 2003 and is currently in place until 2040. BMW has high hopes for its company in China, with the German firm expecting sales in the country to grow further in 2022.
Peter pointed out the outstanding sales of BMW and Mini last year in China, recording 846,237 deliveries of their vehicles for an impressive 9 percent growth. The BMW Brilliance Automotive joint venture provided the bulk of those deliveries, producing 700,000 vehicles in 2021.
BMW is currently expanding its plant in the Dadong District in Shenyang to increase production. The company is also constructing a new facility alongside an existing plant in Tiexi, a factory that will build not only internal combustion engine cars but also fully-electric models and hybrids.
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